Should You Use a Professional Trustee for Your Trust?

Naming a professional trustee for your living trust is a dangerous proposition. Let me share an example.

Joanie and her brother have been trying to settle their mother’s estate for the last two years. It’s a small estate and their mother set up a living trust before she died.

They never expected all these problems. But after shredding nearly $100,000 in legal fees (so far) they’re angry.

When their mother set the trust up, the attorney assured the family that settling the estate would be a quick and inexpensive process once their mother passed.

The trust helped them avoid probate (read “What is Probate?”) so they were convinced the process would be a snap. Unfortunately, it was anything but. What is the problem?

Mother didn’t want the kids to fight about money. Rather than appoint either one as the trustee of the family trust, she named a professional trustee – a big company that also happened to be an affiliate of the brokerage firm she was using.

That’s the root of the problem, because they had an inherent conflict of interest.

The trustee is supposed to settle the estate quickly.

The brokerage firm is interested in prolonging the process as long as possible so they continue collecting fees.

Now, Joanie and brother Rick are faced with the either taking the trustee to court or biting the bullet and accepting what the trustee is doing. Neither choice is very attractive.

What could Mom have done differently?

Simple.

Name a family member trustee.

This can open the door to lots of squabbles of course, but it’s the right thing to do in most cases. And let’s be honest. If there are going to be squabbles, they are going to come up regardless of who is named as trustee.

It’s just that when you name a professional trustee, those squabbles become very expensive and time consuming.

There must be someone in your family who is qualified and responsible enough to act as trustee. Name that person and then talk about it with everyone. Now. While you’re alive and healthy.

Don’t put this off and don’t be a chicken about it. Tell everyone why you’ve selected the person and what you expect of everyone.

If you plan on leaving certain assets to one particular person, tell everyone now and tell them why. This will reduce (but not eliminate) the disagreements.

A professional trustee may be your only choice if you have no heirs. But if that’s the case, it doesn’t really matter…does it? There shouldn’t be any fighting going on.

If you do have heirs, name one as beneficiary. Understand that professional trustees have an incentive to prolong the process.

Selecting a professional trustee to administer your trust may seem like the best choice if you’re trying to avoid family fights. But really, it’s just the easy way out and probably just a delay tactic that’s going to cost your heirs lots more money.

Reader Interactions

Comments

Professional trustees? All I can say is “Oh my God you poor souls!” You have no idea the troubled mess you’re getting into and by the time it stops? They have taken you to the cleaners. The job position itself lures white collar criminals. Unlike attorneys who have to attend years of law school and pass the bar, professional trustees cough up $200.00 initially (last time I checked a few years ago) listen to 40 hours of a class where there is no exam afterwards, and pay $40.00 a year to keep their licence current. That’s IT! And “Bam” you’re in. They also are not monitored by the court or any watchdog agency, and to tilt the playing field even more, they can use your funds out of the trust of which they are appointed trustee to fight you in court if you sue them or contest anything they wish to do. This explains why I got 2 bad ones back to back. Of course, you might get lucky and get an honest one who plays by the book, if those kind even exist, but from my experience you’re in for a real gem of a nightmare. Get ANYBODY else you’d be better off…trust me…You’ll be sorry!

I am contemplating a divorce from my husband of 22 yrs. He financially irresponsible but loves his kids greatly to the point of being a bad parent. I originally had him as my executor, but my estate attorney is advising to find another trustee. I have no family I could trust or who qualifies due to citizen status. Should I consider a professional trustee? About how much do they charge.

My situation is not easy to solve like most. I have one child and I’m single. I dont’ have much family and what little family I do have, we are not close and it’s not appropriate to assign them trustee duties. I’d like to leave my entire estate to charity but do feel my son should have a fair shot at my assets. Unfornately he is a drug addict and unless he eventually hits bottom and gets himself together, it’ll all go up in smoke. I would rather lose my estate in vegas or give to charity than see him use my hard earned money for his destructive habits. So do I waste a ton of money on a professional or do I trust friends to handle my complex wishes? The way my trust is written, my son has 10 years to get clean after my death. If he does not accomplish this, everything goes to charity but he does have 10 long years to work for the prize. That a long commitement for a friend and it involves monitoring my son’s lifestyle and activities. Again, a complex one. Would love anyone’s thoughts.

Thanks. That is a very tough situation. I think you may have no other choice but to select a professional trustee. But you do have time (hopefully a lot of it) to interview people until you find the right firm. Also, 10 years to get clean seems rather long. Why not 10 months?

It’s easy fpor someone to get clean for a year, get the dough & then go on a binge. 10 years is a commited long haul type of thing. More likely that after 10years the money won’t be blown on more drugs. My grandpa had verbiage in his will that if a certain cousin ever tested positive they would be disinherited. It would require a firm to delegate such wishes so that as staff changes there is another persno obligated to take the torch. My own trust is with a estate planning firm run by a famil that is staunchly religious & moral – they have it written in that if they ever go out of buisness before the terms of my trust are met that oneof two other firms will pick up the torch. In my case it’s verification of a certain college GPA before paying for tuition & verification of graduation. Otherwise not a dime till 40. If I left it up to my relatives they’d give my son the money as soon as he’s 18 & ya knowa kid that age will blow it in 6monthsand do lord knows what damage to his life’s path.

My heart feels for you Sarah, I have multiple distant cousins that have or are on your son’s path & it is very hard on the family.

Perhaps I mistated my situation. The trust gives him a 10-year period to get clean not to stay clean. He is young at 23 years and being male, that age group takes much longer to hit bottom than females. The relapse rate for young males is very high. It’s going to be a while before he cleans up his act. I’m still pretty young at 51 but stuff happens and in the event I die young, I don’t want to hand him a loaded gun. I’m looking into a fidiciary. I’m also thinking of just blowing my money – lol. That will makes things simple. If I do that, I’ll be sure to live to 100.

I’ve decided to use a professional trust company to complete my trust for me. The attorney who is doing my trust just wants me to sign the papers, sign the papers, sign the papers, before I have written in the trust exactly what I want done. It seems he just wants to complete the business transaction, whether what I’ve got in my trust is what I want or not. So I’m not too inclined to have them carry out the trust. I talke to a representative of my Credit Union. They have a branch that does nothing but administer trusts. This guy explained how they have a panel of people (each with their own expertise) who carry out my trust wishes. They don’t charge me anything until I pass away, but I can set it all up with them in advance. I got a very good feeling in dealing with them, as they seem very professional in their approach. I’m still working on writing the details of my trust, but I’ll be using the Credit Union to administer my trust.

For a family trustee squabble…lawyers…Court appointed trustees…employ their own brokers, have fees, employ their own lawyers, dont notify you if sale reduced, can evict beneficiaries etc….bad bad news…dont..I had no control over broker,price,parameters, nothing. Don’t hire one..A trusted acct or lawyer even..

This depends on the agreement that is signed. I believe you can control this if the trustee is set up correctly from the get go. Often, people overlook this. So at the very least, have your attorney review the agreement before signing.

I am currently setting up a living trust and am in a major quandry over the selection of a Successor Trustee. My estate is large and complex. There exist no immediate family members equipped to handle my financial affairs with competency and expertise. I have considered employing the estate settlement services of Wells Fargo, however, after reviewing your article I now have misgivings. Do you have any familiarity with the Wells Fargo division of Estate Settlement? They appear to be well versed in this issue. I also have a Tax Attorney that could feasibly oversee and expedite their settlement of my estate, if required.

D, I have no experience with Wells in this way. I do know that they are not someone I’d use because at the end of the day, the person you work with there is beholden to their boss – not you. They will likely do what is in their best interests and protect themselves rather than take any chance at all even if it’s consistent with your goals.

I like the idea of your tax attorney doing this if he/she is reasonably priced – and bonded. My preference would be a professional that you trust and is reasonable. That is far better than a large institution for this kind of thing in my opinion. BTW, would your trust attorney do this?

It is one of the most difficult decisions I’ve ever had to make, and the worst thing is I’ll never know if I’ve made the right or best one. I need a trust for my disabled child. Who the heck can I trust to take care of that pot of money? As a general rule, I trust noone, never have never will. This includes my own kids (6 other than the trust recipient between my wife and I) and gets even worse if I consider any of those kids and the influence of a current or potential spouse thrown in. Yes, then I’ve thought extensively about a professional trustee solution, and also have pondered various conflicts of interest that could bring to the party. Top it off with the fact that very little oversight exists for this very important life function from any government agency leaving the whole proposition open to abuse like the wild wild west it seems and it just is enough to make you sick to die…but you dare not die because of this mess that is left behind.

Ed. This is by far one of the most difficult challenges a parent can face. I have a few clients in the same boat it is all-consuming. I understand the pressures and the mistrust – it’s healthy. My best advice is to continue looking now and not to give up. If you use a professional trustee, you can put in safeguards that allow you to restrict the investments and payouts. It will cost you something but at least you have some sense of a safety net.

Thanks, Neal, I intend to keep looking. My first idea was to consolidate my finances at a too big to fail FI to leverage FA possibilities with the hope they’d also be able to do the co-trustee thing. Now, I know this FI has a trust department – I happen to be employed there. For me, they don’t offer professional trust services. Why? I more than suspect it is because the trust isn’t fully funded until my survivorship policy funds it. I suspect if it was funded with 50M already, they’d have trust services for me. Of course, they didn’t drive this point home when they were anxious to get me to move my financial assets onto their ledger. So, basically I’m back to square 1. I want some professional oversight of this money. My gut tells me any of the other large FI will be the same way, whether it be Citi, Wells, or Chase. Does that sufficiently narrow down where my money currently is??? 🙂 So, really not sure if I can close this loop the way I want it.

Next course, as we all do these days, was just to try to find the best google search to tell me what I want to know. That hasn’t helped yet. There’s not enough money in this business to have just a standard thing like a “professional trustee” rating list – who’s the best and what do they charge list, as if I were buying auto insurance? I can’t find any such information on the web yet.

So, I’ll continue looking. My parallel strategy is to realize I may never be able to pre-select a professional co-trustee and instead I may just pay up to my appointed family member trustee to get some financial education on how to manage a trust and pick a decent financial adviser for what that time comes that she’ll need to know what to do.

still looking…i feel like i’m doing something wrong based on some of the comments which post here off and on which seem to suggest it is something of a trivial matter.

i’ve lost count of the number of major financial firms i’ve approached about managing/comanaging my daughter’s supplemental needs trust. just setting the thing up is a nightmare. god help the person who is entrusted with the job of managing it.

Interesting discussion. It appears that two options are being discussed: professional, corporate trustee v. family member. A third option should be mentioned: a private professional fiduciary to act as trustee.

A private professional is an independent, third party INDIVIDUAL who may act as a trustee, especially in cases that are or will become contentious among family members.

Many states have variants; California codified such trustees in 2008. Licensed, with education requirements and the like, these professional fiduciaries are more flexible and responsive. Due to codes, ethics rules, and how most of us do business, we inherently cannot have conflicts of interest such as the one listed above. Typically, we evaluate three options and pick the best suited for the clients benefit, in from the smallest to largest decisions.

To expand your horizons, limiting the discussion to two options isn’t sufficient…look up “fiduciary” and “California” to see the steps California has taken to provide a third.

i wish to ask if i have private trustee appointed for estate and money can i be part trustee as well,and if i wanted to sell my house which will be in private trustee wat are the negatives regards anna

I plan on using a professional trust service because I have four sisters and I wouldn’t either trust any of them, or punish any of them, by making them my trustee. I don’t have much money, and none of my sisters lives anywhere near me. I just don’t want to leave a mess when I die. I need someone to clean out my possessions in my house and sell my house, get rid of my vehicles. I couldn’t care less how much the professional trustee makes off of me, I just want them to settle the estate.

Another option exists: professional private fiduciaries. In California, individuals can replace professional trustees to manage, administer, and wrap up trusts, estates, and the like. The benefit: one on one contact, independent third party management, and broader range of abilities than professional trustees. In 2008, the state of California wrote into law professional fiduciaries: individuals with specialized training, licensing requirements, and annual education requirements to keep current.

One of our common uses: prevent family in-fighting, such as that listed above by Nunzio Bruno and Evan.

It’s unfortunate that money can tear a family apart…even worse, indecision over the care of an aged family member can take an enormous toll on everyone concerned.

Please recognize that another option exists to professional, large, commercial trustees and family members.

HI ALL,,, I have been reading intently all info regarding TRUST accounts,,, TRUST being the main word to make the focus on…. I am soon to be paid a fairly large sum of a settlement from a car crash accident in which i was injured in which has in turn left me disabled,,, I have been the black sheep of my family for years and therefore dont see much of them anymore… As if things are not bad enough, NOW of all things on top of my disabilities my wife wishes for a divorce or at least a separation for the difficulties of the past few years due to my disabilities since the accident has left its toll on our relationship,, I no longer trust her like i used to and really did wish to have her as trustee on my trust account for my settlement fund with myself as the other trustee … Now as we are about to part company I am in no way inclined to trust her with the control of my funds,, especially as i have recently found a great number of statements from credit cards and loans in which i had no idea that she had ever had… It is not the problem that i never knew she had them, the fact is that she is a great many thousands of pounds in debt and I have absolutely no idea what she has spent any of the money on… Also , although she wont agree, she is an alcoholic .. I have found many empty bottles hidden in wardrobes from wine, vodka and all sorts. this has been an ongoing thing for a very long time and we have had many rows about her secret alcoholic binges…. it had got to such a stage that i have decided that i just did not wish to keep confronting her anymore because she would get extremely angry which would then get me and her having serious shouting matches,,, furthmore There is the gambling problem that she has,,,, need i say anymore…. I simply do not wish for her to have ANY ACCESS OR CONTROL OVER MY FINANCES,,,,,, I simply just do not know who is the best to now trust,,, Can anybody please tell me what are my best options for getting a professional trustee,,What are the pro’s & con’s Has any of you had any sort of experience with a professional firm that are trustworthy and not too expensive and easy to deal with when wishing to have access to ANY Amount of your funds Any helpful advice will be much appreciated

Everyone that I’ve approached about this, being a trustee to keep my kid from blowing the money, has said they’ll just hand the money over to my son’s Dad. My son’s Dad is the most financially irresponsible person I know – he buys whatever crosses his eye no matter what bills are due to be paid (while we were together the power got shut off 3 times because of his video game habit). So, given that most of the money is for my son to keep/maintain the house (if he wishes), for my son to go to college and get a decent start in life (regardless of his Dad’s irresponsible ways), I’m doing a professional trustee so my wishes are followed to a “T”. I did add a paragraph that if six people (from a list of 20) from both sides of my family sign a letter saying the trustee is not following the rules of the will and not acting in kiddo’s best interest then all the money will transfer to a brokerage acct within 30 days. That brokerage acct will pay a percentage out annually to my son till he’s 32 when he gets the lump sum. Don’t know if it’s a good plan but it is a plan (BTW – I’m open to advice/other ideas).

Also, I put clauses in there that if my son passes away all the money is go to charity after debts & such are paid off. And that any spouses he may have, have absolutely no entitlement or claim to the money. I got those from my grandpa’s trust papers – the family has tried several times to bust his trust open & they can’t so I modeled mine after his. My Grandma’s got busted open within a year of her death and it makes me sad her wishes weren’t followed.

I hate to say it (possibly because it’s the first time ever) but I completely disagree with you. Having been the beneficiary of an educational trust with a family member trustee it was without a doubt the worst event in my life. While the family member believed they were acting in my “best interest,” they had ideas as to what the money should be used for, regardless of what was originally intended, and used money as a lever at a time when I was particularly vulnerable. I found a clause that allowed me to remove the money at age 21. I wished for the relationship I had with the family member before the trust and decided to try and remove money from the equation. Now, 10 years later, I barely have a relationship with that person who decided I was greedy, spiteful and ungrateful, and I wish the trust had never existed. I am a strong believer in having an independent trustee. Being a family member doesn’t mean there isn’t a conflict of interest and the damage can be farther reaching than financial.

Third, I’m SO HAPPY you posted this reply. I believe it shows that there are horror stories on both sides of the story.

Certainly, there is no way for anyone to guarantee that a family member will be better or worse than a professional. I haven’t heard many horror stories like this but your story proves it can and does happen.

Personally, if I know someone well, I’d probably take the chance and name a family member.

What you wrote, is plain stupid….it is. If you think that the money is NOT being used for educational purposes, you could have gone to probate. If you removed the money at age 21, then what are you complaining about? You obviously did not use it to be educated, so it sounds like the trustee was doing their job, and you did not want to use it for what it was intended

I am the trustee of an educational trust and I am sure that is exactly what will happen with the money. After the last grandchild is educated and turns 25, the rest is to be divided into 3rd’s per stirpes.

It is your own fault for doing nothing, and frankly you did not even clarify what you “thought”, the trustee was even doing with the money.

Your story has some holes in it. Sounds like you are bitter about the way the trust was set up. That is not the trustees fault.

It is NOT intended for me, UNLESS there is any left over AFTER my son is educated, and I am a daughter. My sister got a huge (and I mean HUGE) life insurance policy, and I got zero. I am still going to do exactly as my mother wanted. That is my job~

This is great information. My parents (I have two sets) are getting older and I’ve started approaching them with questions about where they want to be buried, if their will is in order, and who the executor is. My one set of parents are currently updating everything, so I’m feeling a bit more relieved. My other set, where my step-father is two years shy of 80, is being very vague and they have a fairly large estate. I tried broaching the subject with them, but they remained pretty silent. Either they are in denial that they will eventually pass away, or they aren’t ready to share any of their estate / will information. At least I know what kind of burial plans they’d like (sort of). Hopefully they’ll share their plans in the near future. I’d hate to find out they hired an outside executor to handle everything.

That can be such a headache. You are absolutely right about the conflict of interest with the professional trustees as well. (Great pic by the way I went back for a second look and laughed pretty hard after reading the post)Appointing someone you trust is important and it’s sad to hear about all the wasted time and money on what really can be a very simple process..especially on a smaller estate where wishes and directions are explicitly laid out. Great post!

I agree that a professional trustee is not needed in most situations, but if you want to kill a family as quick as possible – have one family member in charge of the other’s money…

There is a whole set of other problems (at least in NY) with trustee liability. So you have Uncle in charge of the investment choices. What happens when he puts into a business? or junk bonds or even CDs when the market is getting double digits? Kind of a rough position to put Uncle in.

I am the Trustee for my mom, who died a month ago. My nephews already broke into her home and stole things. The police are doing nothing, although I still filed the report. They call me to tell me that they hate me, all the time. I am doing nothing unethical. I am abiding by the wishes of her irrevocable trust, which is for educational purposes. Nobody gets anything until the last grandchild is educated and turns 25. My son happens to be the last grandchild and he is 17, so they have a long wait. My sister hired a lawyer to investigate me, and she also sent me a letter telling me if I contact her in any way, she will have me arrested. How can I communicate to tell her that she will be waiting with this letter? I am suppose to keep in touch with beneficiaries but this makes it impossible. Why is everyone acting so stupid and greedy? My God, none of them were around when she was in hospice. I have handled everything and I am appalled by everyone’s behavior. What can I do legally to keep them from breaking into the house again? It is up for sale and I changed all the locks. Who knew dying would be so difficult on the trustee/executor. I would not wish this job on anyone~

I have no advice to give you but I just want to let you know I know how hard it is to be a trustee. It is not easy and it was a high compliment your mother paid you to name you. I am sure she never imagined the problems you are facing, but she may have had some idea that there would be problems with your other family members and so entrusted it all to you. I hired a lawyer to help walk me through my parents’ trust, and even though it seems to me to be to be a basic “boiler plate” trust, I have gotten different advice, wrong advice, costly advice to the point that I was told I may even have grounds for a malpractice suit. All the while I fought and advocated for my father who is the surviving beneficiary at this point. You are doing the right thing, following your mother’s wishes. Just remember that there are usually provisions within the trust that if you are taken to court over anything to defend yourself as trustee, it can be taken out of the estate. I would imagine, if you have already had things appraised in the home that were stolen and you have proof that these things were sold or kept by your nephews, that can be taken out of their portion of the estate when time comes to settle up. Read your mother’s trust carefully. It probably also has a provision for you to get legal advice, if there are problems with a beneficiary, and charge it to the estate. My mother’s trust even stated that if a beneficiary did what your nephews and sister have done, they were disinherited. “If any beneficiary shall challenge…” look for wording to that effect. And best of luck to you. After dealing with so called professionals giving me conflicting and even damaging direction, I’ve been telling all this to my sons so that they will be better informed as trustees when I am no longer here.

On my reply above– in case it wasn’t clear I was trying to say I fought FOR and advocated for my father, protecting his estate and him. My problems have been with others who were predatory and taking advantage of my elderly father.

I’ve not been around “death” and “estate” issues much in my 49 years. However, one thing I’ve learned seems obvious from a planning perspective – trust absolutely no one – no matter how close they are to you or how much of a “good person” you want to believe they are. Even if they show themselves to be a “good person”, consider that they themselves are probably married or have some offspring who definitely are not. Death brings out the absolute most ugly in the living and if you want to find out how nasty the human condition can get – just waiting until someone of any means to die and watch the mongrels try to tear apart the financial carcass left behind. Makes it very difficult to plan for the well being of those who come after who are not able to take care of themselves.

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Who is Neal Frankle

I'm a Certified Financial Planner™ with more than 25 years of experience. I feel very blessed and hope to share my personal financial experience and professional wisdom with readers of WealthPilgrim. Read More »

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